HICCUPS

Royalties, land problem slows Base Titanium expansion

The Petroleum and Mining ministry has dragged in clearing the Australian mining company which started seeking extension approvals before the 2017 general elections.

In Summary

•Base exhausted the ‘Central Dune’ which it commenced mining in October 2013 to June 2019 and has moved to the South Dune with plans to further expand to other areas in Kwale.

•The three minerals-Ilmenite, Rutile and Zircon remain key exports having generated Sh15.4 billion in 2018, the Economic Survey 2019 shows.

Mining at the Base Titanium mine in Kwale
Mining at the Base Titanium mine in Kwale
Image: FILE

High royalties and resistance from a section of Kwale  residents has slowed down miner, Base Titanium's expansion plans.

The Australian firm has been awaiting clearance from the Petroleum and Mining ministry since 2017 to expand beyond the current site opened in 2013.

Base exhausted the ‘Central Dune’ which it mined from October 2013 to June 2019.

 
 

It has moved to the last site, the ‘South Dune’ on its current licence, with the country's current active titanium mineral  lifespan being three years before deposits are exhausted.

The expansion plan followed explorations that showed potential mineral deposits in other parts of the Kwale county.

The Star has established the government is reluctant to reach a final decision on royalties payable by the miner further compounding the expansion plan.

This, even after Base in 2017 agreed to increase royalty payment from 2.5 percent of export sales to five per cent, with future plans of giving 7 per cent to the exchequer.

It is also grappling with access to land despite reaching an agreement with locals which includes resettlement and sustainability.

Base is seeking variation to its Special Mining Lease which also includes a change to the applicable royalty rate, which has been negotiated by Base and the Government.

“Everyone fully supports the extension but the process has somehow been complicated. We are waiting for government approvals,”Simon Wall, Base's general manager external affairs told the Star yesterday.

 
 

The application by Base to extend the boundary of the Special Mining Lease to incorporate a new area  will provide a 12-14 month mine life extension. 

“It is important that this process is thorough and encompasses all the relevant stakeholders. Base expects the process to be completed in the coming weeks,” Wall said.

As per the existing terms of Base’s Special Mining Lease, the current applicable royalty rate is 2.5 per cent, which the company will continue to pay until the variation of the Special Mining Lease is finalised and executed.

 Treasury and the Petroleum and Mining ministry are pushing for high returns from the minerals , which since the first export in February 2014, have grown to account for 65 per cent of Kenya’s minerals output.

Base completed a concept study for mining of the North Dune Resource in early January 2020, with a pre-feasibility study planned to commence in the March 2020 quarter, subject to board approval.

Completion of a drilling programme (4,200 metres) in the north-east sector (Kwale East) of PL/2018/0119 remains suspended pending resolution of community access issues.

“Drill assay results to date have shown potential for some limited extensional economic resource close to the Central Dune (Bumamani), but remains subject to a more detailed evaluation,” the company notes in its latest operational update.

Further drilling of the northern section of the Vanga Prospecting License (PL/2015/0042) also remains on hold pending resolution of community access issues., the company told investors.

A north eastern extension to the Vanga Prospecting License is under application (App No/1753) to cover further prospective ground which has since become available.

The firm has also applied for additional prospecting licences in Lamu together with an area in the Kuranze region of Kwale County ,about 70 kilometres west of the Kwale operation.

“We hope to get licensed soon and move on,” Wall said, with the company expecting approvals on part of its extension by next month.

Mining and Petroleum PS Peter Kaberia declined to comment on the subject, and instead disconnected our call..

The three minerals-Ilmenite, Rutile and Zircon remain key exports, having generated Sh15.4 billion in 2018, the Economic Survey 2019 shows.

In 2019, full production for the three minerals was 341,181 tonnes, 78,961 tonnes and 28,906 tonnes respectively.